They will be back with a bang in 2013 as they have to put their money somewhere and it is only the stock market the best bet.Besides it is public money so they will not loose anything it is the retail invester to loose if ever it happens. Right now they have to improve the bottom line so have sold.
Domestic funds had to sell due to redemption demands. As the demand for funds from the public remains high due to inflation, redemptions will continue. Hence the net sell by Domestic Funds will also continue.
They might sold in 2012. But where they will go during 2013. Where is a favorable country for them to invest the bail out money other than reinvesting in India?.
It is not clear when they will BUY. 2013 is expected to be a year of BULL RUN. There are a number of factors supporting such Bull Run. If they are SELLERS always, they will lose out to FIIs.